Skin Care's Multifaceted Evolution

By: Nicole Tyrimou, Euromonitor International

Posted: August 26, 2013, from the September 2013 issue of GCI Magazine.

Accounting for one-fifth of global beauty and personal care value, skin care remains the leading category.

In Asia-Pacific, where sales are more than double those in Western Europe, the predisposition toward multi-step skin care regimes has served the category well.

China’s strong momentum is expected to add a further $7 billion to the global skin care market by 2017.

Indonesia, India and Thailand are quickly gaining status as the next skin care markets to watch.

While the multifunctional trend is not expected to fade anytime soon, targeted solutions will continue to push unit prices upward.

Increased availability of devices has raised consumer awareness of these products, and recent launches indicate the device segment is moving toward anti-aging and more salon-style treatments.

Anti-aging, the fastest growing category in skin care over the last five years, is showing signs of stagnation.

Anti-aging claims, however, are being made in other categories, and with the median age of the female population nearing 40 and rising in North key markets, anti-aging is expected to only strengthen its presence within other categories.

With sales of nearly $100 billion in 2012, equating to one-fifth of global beauty and personal care value, skin care’s dominance remains unbreakable. But the category’s prevalent trends currently play on opposite sides of the spectrum. On the one hand, an increasing focus on status and individuality is driving a greater need for products, services and experiences tailored to the individual. On the other, a one-size-fits-all approach has triggered demand for more convenient and quick-fix solutions. How are these conflicting trends affecting the market, and how will the future shape up for skin care?

Asia—The Knight in Shining Armor

With almost half of global skin care sales coming from Asia-Pacific—where sales are more than double those in Western Europe—the region’s predisposition toward multi-step skin care regimes has served the category well. Japan, the leading global market in terms of skin care, has had its first year of positive growth in 2012 after five years of decline, with both the premium and mass segments growing. China, which displaced the U.S. in 2011 to become the world’s second-largest market and which continues to mount the pressure on Japan, posted a 14% value compound annual growth rate (CAGR) over the last five years. Its strong momentum is expected to add a further $7 billion to the global skin care market over the forecast period, with the country assuming the number one spot from Japan in 2017.

While the main focus for skin care players remains the golden three (China, Japan and South Korea), with the latter expected to displace Germany in 2014 as the world’s fifth biggest market, Indonesia, India and Thailand are quickly gaining status as the next skin care markets to watch. Over 20% year-on-year increases in value and estimated combined added value of $2.5 billion, or around 15% of anticipated global value to 2017, have put these regions in the spotlight. As increasing urbanization and a vibrant rising middle class drive a switch from unbranded to branded goods, many of the large players are expanding their presence and investing heavily in these markets despite the presence of powerful local brands.

The U.S. and North American markets are set to remain stable, with modest CAGRs of 1% to 2017, while Western Europe will continue to struggle due to declines in Spain and Italy—a gain of just $15 million to 2017 is predicted. As the other emerging regions of Latin America, the Middle East and Africa, and Eastern Europe remain relatively weak in skin care, Asia-Pacific with its additional $11 billion, or close to 70% of overall value, will continue to be the story in the skin care category.

Premium Skin Care Boosted by Specialization

With a multitude of new product launches every year, an increasing focus on catering to the individual and providing a more exclusive and unique experience is gaining momentum. This has materialized in more targeted solutions, which have emerged in many different forms. These vary from the type of product, like a serum, a device or a service (offerings that target specific problems such as fighting hyperpigmentation or minimizing pores) to application formats—oils, roll-ons and measured doses, and age-segmented products, as examples. Specific examples include recent launches for the over 50s from Mary Kay, Shiseido and L’Oréal Paris.

Devices in particular, especially since the acquisition of Clarisonic by L’Oréal in late 2011, have been the focus for many companies and retailers alike. From Harrods’ dedicated devices section to Sa Sa and Nordstrom’s wide portfolio of devices, increased availability has raised consumer awareness of these products. While the U.S. is considered by many an important market for beauty devices, the predilection for skin care and the popularity of techno gadgets in Asia have fostered a range of devices that vary from offering pore minimization and cleansing to whitening, even specialized eye care devices. Furthermore, launches such as Tria Beauty’s anti-aging skin rejuvenation laser, the first of its kind, indicate how the beauty device segment is firmly moving from hair removal and facial cleansing toward anti-aging and more salon-style treatments.

Looking beyond devices, the next generation of targeted solutions will gradually start to shift to beauty services in the form of personalized or bespoke formulations that target the specific needs and concerns of consumers. Examples of this are already on the market, such as the Ioma Beauty Diag machine, which, after taking a series of pictures, analyzes the skin and offers a tailored recommendation from over 800 possible skin care formulations. The Organic Pharmacy’s DNA skin care test is another example, analyzing a saliva sample to offer a personalized skin care prescription.

As most of these innovations tend to have a premium positioning, they have helped companies to push up prices and compensate for the premium segment’s slower growth. This, coupled with the increasing high-tech claims of brands, has elevated the competitive barrier for mass players looking to enter the specialized solutions market.

Anti-aging Starts to Feel the Heat

Anti-aging, the fastest growing category in skin care over the last five years, is showing signs of stagnation, growing by 7% globally in 2012—the same growth rate as in 2011. One of the primary reasons for this is the rise of multifunctional products across all beauty and personal care categories. From hair care to color cosmetics, the majority of new products are including anti-aging claims, showcasing how the anti-aging label has become a must-have on new products’ list of multiple attributes.

BB and CC creams are a type of new product that epitomizes the trend of multifunctionality. The influence of the younger female consumer, who has been the focus for beauty companies (especially in Western Europe and North America), has helped foster the BB cream craze. In addition, BB creams also provide a lower entry price point for premium brands, as they are less expensive than anti-agers—which is only one of the BB/CC claims along with coverage and sun protection. With the “value for money” mentality still strong and the media buzz surrounding these products elevating them to cult status, the other facial makeup category, within which BB/CC creams are included, registered a 30% increase in 2012 in the U.S. alone, helping facial makeup to outperform facial care globally.

The Future Remains Skin Deep

As the direction of the anti-aging category changes from its traditional focus on reducing lines to encompassing skin enhancements—such as evening out skin tone, fighting hyperpigmentation and reducing sun damage, among other things—the marketplace is welcoming a new generation of products that are both multifunctional and targeted. For example, AR Advanced Retinol Night Treatment, a recent launch from StriVectin, is being touted as the company’s first multi-tasking product, as it claims to combat dullness, aging, dark spots and firmness, among other things. At the same time, it is targeted at night-time usage, showcasing how one product can play to both spectrums and indicating that despite the popularity of multifunctionality, a direction in the form of specialization is still important as consumers look for indicators as to which product is most suitable for them.

While this multifunctional trend is not expected to fade anytime soon, targeted solutions will continue to push unit prices upward, and skin care’s dominance in overall beauty will remain unquestionable. As more segments—from color cosmetics and hair care to deodorants—look at skin care for inspiration as well as align claims with skin care, blurring the lines between these categories, some cannibalization is inevitable. However, skin care, with its supremacy in Asia-Pacific and increasing penetration in Latin America, is expected to increase the gap on hair care by a further $5 billion by 2017.